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The Early Bird Gets the Worm...or in this case a successful Short Sale!

Friday, February 5, 2021   /   by Deborah Puleo

The Early Bird Gets the Worm...or in this case a successful Short Sale!

There are certainly a lot of factors when reviewing what it takes to have a successful short sale in real estate.  Before we go into those factors, let's first review what is a short sale.  A short sale is exactly as it sounds.  It is when the borrower owes more than what the property is worth and the lender accepts less than what is owed on the mortgage.  So when would a homeowner need to short sale?  That question is answered by looking at their hardships.  Was there a job loss, an illness, divorce, a disaster, pandemic, something that changed their ability to pay their mortgage and other expenses?  The answer should be some or all of these mentions and that question will be asked by the lender as they require a hardship letter with the short sale package. Click here to see what are some things NOT to say in a short sale hardship letter.  Click Here to learn on what is good to include in your hardship letter.  Be sure to take notes! 

When deciding to move forward with a short sale, there are some important decisions to be made and information to be learned.  Understandably, homeowners are usually overwhelmed and saddened by being in this position.  Having a good professional team is a must!  Here are some of the professionals a homeowner will need to help them through this process and on the road to financial recovery:

1.  The first would be an agent that specializes in distress sales.  Most agents boast of having expertise, but few really know the in's and out's.  Seek out a broker with years of experience and if you can find one with REO experience, even better!  The reason being, is they know what the disposition department looks at when making decisions such as accepting short sales, modifications, and moving forward with foreclosures.  They also should have good knowledge on specific servicers and what their typical strategy looks like.
2.  A real estate attorney is someone worth having on a homeowners side, because they can help keep track and answer foreclosure suits and further help with the timeline of the short sale and foreclosure.  They know, just like an experienced real estate broker that the clock does not stop ticking for a foreclosure just because there is a modification or short sale being attempted.  A real estate attorney can help negotiate deficiencies and be sure the contract protects the homeowner from the bank seeking a judgment after the short sale. Read more about deficiencies here. 
3.  A savvy accountant to be sure the homeowner is not taxed on the forgiven balance.  Here is where you can learn a little more on the form a knowledgeable tax professional can save the homeowner an expense they can't afford and possibly avoid the need for a bankruptcy.  
4.  A title agent that understands the importance of prompt title work and communication with all parties is a great asset to the homeowner.  The bank will want to know of all liens and judgments that will affect their bottom line.

With Covid affecting so many Americans, it is understandable that there are plenty of modifications, forbearances, and short sales landing on asset manager's desks.  Every bank has a process on steps and attempts a homeowner must take before each of these options are available.  Altisource predictions show what will happen after the loads of forbearance agreements end.  You can view this data here. 50% will obtain loan modifications.  Modifications can be either a modification or a short sale.  30% are expected to repay and 20% are expected to end up in loss mitigation which means most likely a foreclosure.

With the data known of what banks expect, it is wise to act as early as possible.  The early bird truly does get the worm!  The more files that pile up on a asset manager's desk, the longer the process will take.  Also, as more and more short sales and modifications are requested, the market starts to come down.  The inventory affects the market and where we once see a seller market with limited inventory, it turns to a buyer's market with ample inventory.  When time is of the essence, the early bird is often successful as their property condition remains intact, whereas a property where a homeowner lacks the funds to maintain, sees the value decline which affects the short sale amount and chances of success.  

The Oak Agency specializes in distress and REO sales and has working knowledge of every aspect.  From a short term forbearance to a deed in lieu, The Oak Agency will provide a homeowner with all options available.  The Oak Agency has a great team on standby and ready to assist.  A great proverb Home is Where the Heart Is by Gaius Plinius Secundus is a great reminder that a property is a property, your home is where you are loved and accepted.  With the right and swift actions, a new property is in a short sale seller's near future.  Just a bump in the road...onward and upward. 

Feel free to reach out to the author of this blog by clicking here!

Deborah Puleo SFR®   

The Oak Agency
Real Estate Instructor
Toll Free: 844 OAK SOLD Ext 708
OFFICE: 561-268-6200
DIRECT: 561-767-1258